RBC’s Affordability Index for the third quarter rose at the National level for the first time in 6 quarters. However, all measures are still down markedly from a year ago, thus maintaining homeownership at affordable rates and supporting very strong demand for housing across the country. Remember, it is important to look at what point in time increases are being measured from (e.g., yes the market is up from November 2008 but how much had the market dropped from November 2007?). The current levels mirror those in 2006 when the market was about to shift into high gear across the country.
What does RBCs report say about Ontario?
The substantial improvement in housing affordability since early last year appears to have worked its magic in Ontario and historically low mortgage rates are a big part of that. When you take read on on other recent news about low mortgage rates, it looks like low interest rates will continue to help fuel the housing market for a few more years. The sudden downturn that hit the province’s housing market late last year is now officially a thing of the past — resale levels have generally recovered most of the ground lost and, more importantly, prices have returned to, and in some cases surpassed, earlier peaks. While this remarkable turnaround has brought back confidence in the market — even a bit of frenzy in certain pockets around the province — the downside is that rising property values have begun to undo some of the progress made on the affordability front. In the third quarter, RBC’s affordability measures for Ontario rose for the first time since early 2008, up between 0.5 and 1.0 percentage points. Nonetheless, these increases represent only modest erosion of the four to seven percentage- point declines achieved previously and affordability remains generally attractive in the province from an historical point of view.
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